Sentiment a bit cautious in session on numerous factors

EU Market Update: Sentiment a bit cautious in session on numerous factors (Ukraine cease fire, Scottish referendum and Fed potential language change)

Notes/Observations

- Caution prevailed among investors over concern of less accommodative FED

- France pushes back meeting its 3% budget deficit to GDP target by two years until 2017

- Both Ukraine govt and separatist rebels express concerns that current cease-fire to hold

Key Economic Data in session

- (IN) India Aug Local Car Sales: 153.8K v 137.9K prior

- (FR) France Q2 Final Non-Farm Payrolls Q/Q: 0.1% v 0.1%e

- (FI) Finland July Industrial Production M/M: -0.3% v +0.3%e; Y/Y: -2.6% v -3.0%e

- (FR) France July Industrial Production M/M: +0.2% v -0.5%e; Y/Y: _0.1% v -0.3%e

- (FR) France July Manufacturing Production M/M: -0.3% v -0.3%e; Y/Y: 0.2% v 0.2%e

- (DK) Denmark Aug CPI M/M: -0.2% v +0.1%e; Y/Y: 0.5% v 0.8%e

- (DK) Denmark Aug CPI EU Harmonized M/M: -0.2% v +0.1%e; Y/Y: 0.3% v 0.5%e

- (ES) Spain July Industrial Output NSA Y/Y: 1.0% v 0.4%e; Industrial Output SA Y/Y: 0.8% v 1.4%e

- (TR) Turkey Q2 GDP WDA Q/Q: -0.5% v +0.4%e; Y/Y: 2.4% v 3.0%e; GDP (unadj) Y/Y: 2.1% v 2.8%e

- (EU) ECB €5M borrowed in overnight loan facility vs. €0.0M prior; €33.0B parked in deposit facility vs. €24.4B prior - Daily Eurosystem Liquidity Conditions

- (NO) Norway Aug CPI M/M: -0.3% v -0.3%e; Y/Y: 2.1% v 2.1%e

- (NO) Norway Aug CPI Underlying M/M: -0.5% v -0.4%e; Y/Y: 2.2% v 2.3%e

- (NO) Norway Aug PPI including Oil M/M: -0.7% v -0.5% prior; Y/Y: -3.3% v -1.7% prior

- (GR) Greece Aug CPI Y/Y: -0.5%e v -0.7% prior; CPI EU Harmonized Y/Y: -0.2% v -0.5%e

Fixed Income

- (IN) India sold total INR120B vs. INR120B indicated in 3-month and 6-month Bills

- (EU) ECB allotted $75M in 7-day USD Liquidity Tender at fixed 0.59% vs. $75M prior

- (IT) Italy Debt Agency (Tesoro) sold €8.25B vs. €8.25B indicated in 12-month Bills; Avg Yield: 0.271% (record low) v 0.279% prior; Bid-to-cover: 1.64x v 1.83x prior

- (SE) Sweden sold SEK15B in 6-month Bills; Yield: 0.1398%

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

***Equities***

Indices [Stoxx50 -0.2%, FTSE 100 -0.1% at 6,820, DAX -0.2% at 9,691, CAC-40 flat at 4,451, IBEX-35 -0.7% at 10,873, FTSE MIB -0.1% at 21,119, SMI -0.3% at 8,795, S&P 500 Futures -0.1% at 1,988]

- Market Focal Points/Theme: Equity markets open lower (amid declines in shares of Apple) as some cite concerns related to the US rate outlook, Spain's IBEX continues to underperform amid some focus on the Nov Catalonia referendum (Santander declines), Shares of Apple trade lower in Frankfurt following product announcement, UK homebuilder Barratt Development issues cautious outlook

By Sector

- Consumer Discretionary [Kingfisher KGF.UK +2% (new CEO, stock buyback), Barratt Developments +1% (FY profits rose)

- Financials [Santander SAN.ES -1.5% (death of Chairman); Optimal Payments OPAY.UK +3% (H1 results rose)]

- Technology [Gemalto GTO.FR +2% (Apple's product announcement)]

- Industrials [Fiat F.IT +2% (resignation of Ferrari's Chairman)]

- Stoxx50 sectors [Telecom -0.9%, Industrials -0.5%, Basic Materials -0.3%, Energy -0.3%, Consumer Non-Cyclical -0.2%, Financials -0.1%, Utilities +0.2%]

Speakers

- France Fin Min Sapin cuts its 2014 and 2015 GDP growth outlook and pushed back achieving the 3% deficit target by two years until 2017. The 2014 GDP growth was cut from 0.8% to 0.4% while 2015 GDP was cut from 1.7% to 1.0%. The fin min noted that France did not seek change of EU deficit rules but wanted the weak economic reality to be taken into account

- Turkey Central Bank Gov Yilmaz commented after the Q2 GDP data that the Govt working on revising its 2014 GDP target. He noted that Q2 data put annual growth between 3.0-4.0% pace. Stated end-2014 inflation might be revised higher but likely to be a single-digit and would not change the food share in the inflation basket

- Turkey Fin Min Simsek: 2014 GDP growth to miss the 4.0% target

- Finland Trade Min Toivakka opposed delaying new sanctions on Russia indefinitely and added that the current cease fire was not enough to delay sanctions. EU sanctions should start in days if Russia doesn't comply

- Ukraine President Poroshenko stated that Separatists rebels have been provoking Ukraine forces constantly but vowed to make best efforts to maintain cease-fire agreement

- Luhansk separatist rebel leader Plotnitskiy believed current cease-fire agreement would not last; sees Ukraine govt forces regrouping in the East

- China PBoC chief economist Ma: Number of stimulus measures were making impact on investments, particularly in the railroad and housing sectors

Currencies/Fixed Income:

- Dealers have been relishing the recent spike in volatility from historically low levels (have to make money to get those bonuses). The question is whether a fundamental change is now upon the currency markets with perhaps a multi-year recovery for the USD. One major analyst noted that the extent of the moves and the lack of correction were consistent with a longer-term change in currency market trends

- The USD/JPY continued to hit 6-year highs as the pair moved towards 106.70. Aanalysts' noted that BOJ made its first purchase of negative-yield JGBs on Tuesday and believed this might increase speculation of further BOJ easing

- The GBP currency remained vulnerable as more polls will be released regarding the upcoming Scottish referendum. The Survation Poll is schedule to be released at 17:30 ET (21:30 GMT) with talk that the yes vote was improving to 54%. The GBP/USD hot a fresh 9-month low at 1.6152

Political/In the Papers:

- (UK) Queen Elizabeth II to remain neutral on the impending Scotland independence referendum, did not want to influence the vote - London Telegraph

Looking Ahead

All times listed for economic events are denominated in Eastern Standard Time (Add 4 hours for GMT equivalent)

- (MX) Mexico Aug Nominal Wages: No est v 4.1% prior

- 05:30 (DE) Germany to sell €5.0B in new 1.0% 2024 Bunds

- 06:00 (PT) Portugal Aug CPI M/M: -0.2%e v -0.7% prior; Y/Y: -0.4%e v -0.9% prior

- 06:00 (PT) Portugal Aug CPI EU Harmonized M/M: -0.3%e v -0.6% prior; Y/Y: -0.3%e v -0.7% prior

- 06:45 (US) Daily Libor Fixing

- 07:00 (US) MBA Mortgage Applications w/e Sept 5th: No est v +0.2% prior

- 07:00 OPEC Monthly Report

- 07:00 (UK) Prime Minister's cancelled his weekly question Time in House of Commons (off to Scotland ahead of referendum vote)

- 07:30 (CL) Chile Central Bank's Economist Survey

- 07:30 (CL) Chile Central Bank's Trader Survey

- 07:45 (AT) ECB's Nowotny (Austria) in Hamburg

- 08:00 (HU) Hungary Central Bank's Minutes

- 08:15 Baltic Dry Bulk Index

- 08:30 (CA) Canada Q2 Capacity Utilization Rate: 82.9%e v 82.5% prior

- 08:30 (BE) ECB's Praet (Belgium) at Eurofin Financial Forum

- 09:00 (MX) Mexico Jun Gross Fixed Investment: 2.8%e v 0.4% prior

- 09:45 (UK) BOE Gov Carney at Eurofin Financial Forum

- 09:45 (UK) BOE reverse auction; to purchase £1.6B in 7-15 year Gilts (residual)

- 10:00 (DE) Germany Chancellor Merkel holds CDU Election Rally at Wittstock

- 10:00 (DE) German Bundesbank Dep President Buch in Frankfurt

- 10:00 (US) July Wholesale Inventories M/M: 0.5%e v 0.3% prior; Wholesale Trade Sales M/M: 0.6%e v 0.2% prior

- 10:30 (US) DOE Weekly Oil Inventories

- 11:00 (US) Kansas City Fed indicator (new combined indicator)

- 11:00 (EU) ECB's Mersch(Luxembourg) in Frankfurt

- 11:00 (US) Fed to Purchase $0.35-0.45B in Notes

- 12:00 (CA) Canada to sell 2-Year Bonds

- 13:00 (US) Treasury to sell $21B in 10-Year Notes Reopening

- 17:05 (NZ) RBNZ Gov Wheeler post rate decision press conference

- 17:30 (UK) Survation Poll on Scottish Independence referendum

- 19:00 (KR) South Korea Aug Unemployment Rate: No est v 3.4% prior

- 19:01 (UK) Aug RICS House Price Balance: 47%e v 49% prior

- 21:30 (CN) China Aug PPI Y/Y: -1.1%e v -0.9% prior

- 21:30 (CN) China Aug CPI Y/Y: 2.2%e v 2.3% prior

- 21:30 (AU) Australia Aug Employment Change: +15.0Ke v -0.3K prior; Unemployment Rate: 6.3%e v 6.4% prior